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GBP/USD – Bearish confirmation or bullish break?

A pivotal moment

The pound has reached an interesting level against the dollar, one that could determine whether the pair is back in bullish territory or the end of a correction.

The pair found strong support around the 200/233-day SMA band a couple of weeks ago and has rebounded strongly since. This came after it broke below the 55/89-day SMA band in mid-June, which had been a reliable level of support over the last year.

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The pair now finds itself running at the 55/89 band from below, which will be an interesting test of the strength of the breakout. A rebound off this level would act as confirmation of the breakout.

With the 55/89 band also falling around the 50 and 61.8 fib levels – June high to July low – it really is a big level for the pair. A move back above may be seen to be overriding the initial breakout while a failure could be a very bearish signal.

The key level below then arguably becomes 1.38, which coincides with past support on the daily chart but also some key levels on the 4-hour chart.

The pair only recently broke above the 55/89 and 200/233 SMA bands on the 4-hour chart which could give it momentum to run at 1.40 and break through major resistance.

A move below 1.38 takes the pair back below both moving average bands on the 4-hour chart, which could act as further bearish confirmation.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam [5]

Senior Market Analyst, UK & EMEA at OANDA [6]
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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